NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF

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SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF
JANUARY 28 - FEBRUARY 1, 2008

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1. (U) Below is a compilation of Economic highlights from Embassy
New Delhi for the week of January 28 - February 1, 2008.

CARREFOUR COMING TO INDIA
--------------


2. (U) French retail giant Carrefour, after several abortive
attempts to reach a deal with an Indian partner over the past few
years, has announced that it is close to finalizing a franchisee
pact with one of its three short-listed Indian candidates for
multi-brand retail outlets. The company has not revealed the
identities of its three potential partners. Carrefour also plans to
open wholly owned cash-and-carry outlets, a format for which foreign
direct investment of 100 percent is permitted in India.

NOVARTIS CASE DELAYED
--------------


3. (U) The Indian Supreme Court Monday stayed the order of the
Madras High Court regarding the constitution of the Intellectual
Property Appellate Board (IPAB) set to handle Novartis's appeal of
its patent rejection for the leukemia drug Glivec. The appeal was
scheduled for Monday but will now be delayed until the matter is
resolved. Novartis had objected to the inclusion of technical
expert S. Chandrasekharan on the IPAB because Mr. Chandrasekharan
had been the Controller General of Patents at the time when the
original patent application for Glivec was refused. The Madras High
Court had subsequently ruled that the IPAB could hear Novartis's
appeal without a technical expert. This prompted generic-drug
manufacturer Natco Pharma to appeal to the Supreme Court that an
IPAB without a technical expert could not effectively evaluate the
case.

CFA INSTITUTE RESUMES REGISTRATIONS
FOR OUTSIDE TEST CENTERS
--------------


4. (U) In December, the Delhi High Court dismissed the CFA
Institute's petition requesting that the ban placed on its
operations by the All India Council for Technical Education (AICTE)
be lifted. CFA offered training and testing in India for Chartered
Financial Analyst (CFA) certification from 1995 until May 2007, when
the AICTE, prompted by complaints from ICFAI (an Indian competitor
of CFA that CFA was suing for trademark infringement in Indian
Courts) ordered CFA closed because it was operating without prior
AICTE authorization. CFA has more than 10,000 enrollees in India,
and their Director for Asia Pacific Operations indicated in a
meeting with Econoffs that CFA is eager to reach an accommodation
with AICTE. During CFA's most recent meeting with AICTE, AICTE
granted CFA permission to accept registrations in India for exams
that will take place outside of the country, a small but positive
sign that AICTE is willing to work with the CFA Institute to resolve
this issue.

TATA CHEMICAL BUYS U.S.
SODA-ASH COMPANY
--------------


5. (U) Tata Chemical, which previously had an 8-percent share of
the global market for soda ash, increased its share to 14 percent
with the purchase, announced Thursday, of U.S. company General
Chemical Industrial Products, making Tata the world's second-largest
producer of soda ash. The USD-1-billion purchase gives Tata a share
in the Green River Basin (Wyoming) mines, the world's only known
source for commercially viable, natural trona ore, from which soda
ash is made. Soda ash accounts for 70 percent of the materials that
go into the manufacture of glass, as well as 30 percent for powdered
detergents. (Comment: Post requested a drop in the tariff on soda
ash from 7.5 percent to 5 percent in its annual budget non-paper to
the GOI. Tata's purchase is likely to improve the chances of such a
reduction. End comment.)

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FINANCE MINISTRY TO CONSIDER
SOVEREIGN WEALTH FUND
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6. (U) Despite Finance Minister Chidambaram's recent announcement
that India would not pursue a sovereign wealth fund (SWF),business
daily The Economic Times reported Thursday that the Ministry of
Finance is planning to set up a committee to analyze the pros and
cons of an SWF. Supporters point out that India gets less than 5
percent on its USD 266.5 billion in foreign-exchange reserves by
investing in U.S. treasury bills, while Singapore gets more than 20
percent with its SWF. The argument in favor of an SWF has gained
steam since September, when China floated the USD-200-billion China
Investment Corporation, but opponents point out that China is
drawing from a current account surplus, while India runs a current
account deficit.

PANEL DEBATES PREFERENTIAL
TRADE AGREEMENTS
--------------


7. (U) The CUTS Center for International Trade, Economics and
Environment, a prominent non-government research institute,
organized a panel of GOI figures, economists, and industry
representatives January 29 to discuss India's approach to both
bilateral and multilateral free trade agreements (FTAs). Department
of Commerce Additional Secretary Rahul Khullar stressed the
importance of unilateral liberalization while aggressively pursuing
bilateral trade agreements, especially given "the backdrop of a hazy
outlook from Geneva (Doha)," with the broad objective of increasing
India's share of global trade in goods. He emphasized that success
in the Doha Round is still crucial to India while noting that
regional economic engagement also promotes economic cooperation,
citing the successes of NAFTA and EU.


8. (U) Economists cautioned Indian policy makers that trade
diversions and distortions can result from overlapping bilateral
trade agreements. Rajeev Kumar, an eminent economist heading the
Indian Council of Research on International Economic Relations
(ICRIER),believes India should liberalize itself first, then work
with neighboring countries and then with the rest of the world.
Prof T. N. Srinivasan of Yale University also advocated the Doha
global forum for liberalization as the best option. He was very
skeptical about gains from the "mad rush" to conclude FTAs and
flagged his doubts over complex negotiations such as the Indo-EU FTA
where negotiations have commenced.

GOI PEGS 2006-2007 GROWTH RATE
AT 9.6 PERCENT
--------------


9. (U) On January 31, the GOI revised its estimate of India's
growth rate for 2006-2007 from 9.4 to 9.6 percent and for 2005-2006
from 9.0 to 9.4 percent, raising the average annual growth rate over
the past four years to 8.8 percent. The revised rate of 9.6 percent
is the highest annual rate in 18 years. The higher estimate stems
from higher growth than projected in the mining, manufacturing,
financial, construction, and services sectors. Additionally, the
agriculture sector experienced higher growth than expected, but
slower growth than in the previous year. Finance Minister
Chidambaram projected India's economy to grow at 9.0 percent in
2007-2008, with the help of rising foreign and domestic investment,
and stated that he is prepared to make rapid policy adjustments to
sustain high levels of growth in a time of global economic
uncertainties.

U.S. REAL ESTATE AND MORTGAGE
WOES ECHO IN SOUTH INDIA
--------------


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10. (U) Wage cuts and interest rate hikes are softening South
India's real estate market and realtors are encountering
difficulties in selling space. The formerly booming markets of
Bangalore, Cochin and Hyderabad have seen real estate price declines
of 5 to 10 percent, according to the business press. Primary
residential sales in Bangalore have reported dropped by 30 percent
over the past year and decreasing demand is forcing developers to
use innovative schemes to attract potential buyers.


11. (SBU) The regional head of a major real estate company told
Consulate Chennai that there was a visible slump in demand for real
estate, particularly in the housing segment. A top executive at an
international bank told us that many of his customers are seeking
modifications in their repayment schedule, due mainly to increases
in interest rates and recent wage cuts at some of India's big-name
information technology firms, including Tata Consultancy Services
(TCS) and Wipro. He said that his bank is increasing repayment
periods and reducing monthly payments for many of these customers.

BOEING FORMS PUBLIC-PRIVATE
AEROSPACE RESEARCH CONSORTIUM
--------------


12. (SBU) Boeing signed a tripartite agreement with the Indian
Institute of Science in Bangalore (IIS-B),Wipro Technologies, and
Hindustan Computers Limited (HCL) to develop wireless and network
technologies for aerospace applications. A Boeing press release
announced the agreement, calling it the Aerospace Network Research
Consortium and describing it as the first of its kind in India. The
project's leader for WIPRO told Consulate Chennai that IISC will
undertake basic research while Wipro and HCL will work more on
applications. Our interlocutor, noting his company's non-disclosure
agreement with Boeing, did not wish to elaborate further on the
specifics of the arrangement.

INTERNET DISRUPTION HURTS
SOME OUTSOURCING COMPANIES
--------------


13. (U) Business-process outsourcing firms (BPOs) in South India
faced disruptions following damage to an undersea cable in the
Mediterranean on January 30, but smaller firms were hit harder than
big ones. Smaller firms, which make up 12 to 15 percent of the
sector, often lack the connectivity redundancy of larger firms,
making them especially vulnerable to these sorts of disruptions.
Firms located in smaller cities also faced greater disruptions than
those in India's metropolitan centers, according to the business
press.


14. (SBU) One BPO executive told Consulate Chennai that the
disruption prevented his company from delivering services within its
usual timeframe. He also told us that the disruption prevented his
company from working effectively on projects that involved detailed
graphics, which depend on the high-speed transfer of large amounts
of data. He added that his company had to send these kinds of
projects to its Sri Lanka branch, which remained unaffected. An
executive for an even larger BPO told us that his company was able
to route its traffic through cables connecting India with the United
States via Singapore and Guam, allowing it to continue to operate
largely unaffected.


15. (U) Visit New Delhi's Classified Website:
http://www.state.sgov/p/sa/newdelhi

MULFORD